Dollar Index Edges Lower as Investors Gauge Fed Rate Path

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Dollar Index Edges Lower as Investors Gauge Fed Rate Path
Credit: © Reuters.

By Scott Kanowsky 

Investing.com -- The dollar eased back slightly from a 20-year high reached earlier this month on Monday, following disappointing U.S. economic data that may dampen expectations for aggressive Federal Reserve rate hikes.

As of 02:38 AM EST (0638 GMT), the U.S. dollar index - which measures the greenback against six rival currencies - was down 0.13% at 103.820. The index is trading below a two-decade peak of 105.79 touched on June 15 after the Fed raised borrowing costs by 75 basis points in a bid to curb soaring inflation .

Fears that these Fed actions could trigger a global economic downturn gave support to the greenback and the perceived relative safety of dollar-denominated assets.

But on Friday, the final June reading of the closely-watched University of Michigan consumer sentiment index slumped to a record low, suggesting that Americans are becoming more pessimistic about the economic outlook amid a recent spike in prices. The gloomy mood may lead some investors to reevaluate their predictions for potential Fed rate rises .

Major currencies in Europe increased against the dollar. GBP/USD rose by 0.12% to $1.2278, while EUR/USD firmed slightly by 0.05% to $1.0559 ahead of a key European Central Bank forum in Portugal this week.

Elsewhere, China's yuan is holding near the flatline following an announcement by authorities in Shanghai that the city had emerged victorious over a recent COVID-19 outbreak.

In Russia, the USD/RUB was also steady at 53.40 per dollar after a deadline for Moscow to repay foreign debt passed, potentially putting the country on a path toward default.

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